China wins big in R50bn rail fleet contract

Business News / 18 March 2014, 08:00am

Londiwe Buthelezi

170314 (L) Dr Lutz Bertling shakes hands with Transnet CE Brian Molefe after the signing of the agreement to deliver locotives to Trans freight rail and signing was held in Hydepark North of Johannesburg.photo by Simphiwe Mbokazi

Johannesburg - Chinese engine manufacturer China South Rail (CSR) will take the biggest share of the R50.4 billion contract to produce new-generation locomotives for Transnet, which announced the names of the four successful bidders yesterday.

Transnet said this was South Africa’s largest locomotive supply contract.

The logistics parastatal will procure 1 064 locomotives – 599 electric and 465 diesel – from the four bidders announced yesterday. The R50.4bn total includes hedging and escalation.

CSR Zhuzhou Electric Locomotive, the company whose R2.6bn contract with Transnet to build 95 electric locomotives in 2012 saw the Workers International Vanguard League request that the deal be investigated, will produce 359 more electric locomotives for the state-owned company. The value of CSR’s contract is R14.6bn.

Bombardier, the Canadian company that was involved in building the Gautrain with the Bombela Consortium, will produce the remaining 240 electric locomotives for R10.4bn.

General Electric South Africa Technologies will produce 233 diesel locomotives for R7.1bn and CNR Rolling Stock South Africa will produce 232 diesel locomotives for R7.8bn.

The request to probe CSR’s 2012 locomotive contract with Transnet stemmed from a deal that one of CSR’s subsidiaries won in Namibia in 2007, in which it delivered faulty diesel locomotives that had to be withdrawn from service within weeks of being delivered.

Early last year, various technical problems were experienced by the Tanzania-Zambia Rail Authority on locomotives that were supplied by CSR Qishuyan Locomotive in late 2012. Later last year, two diesel locomotives from CSR Ziyang were grounded and quarantined in Australia because they contained asbestos.

But CSR president Liu Hualong said that while he believed “different people have different opinions” regarding the company’s advantage that qualified it to win the biggest share of the tender, CSR would deliver the “best quality” electric locomotives as it was a leader in that sphere and China was known as “the home of electric locomotives”.

“First of all, we have a very complete system for development and manufacturing for the electric locomotives. This complete system promotes our capability and capacity to develop and produce the locomotives,” Liu said.

CSR’s 23 subsidiaries had four engineering testing centres, nine national design centres and seven national testing centres and Liu said this demonstrated their capability.

“We sorted out the problems in Namibia quickly and those were diesel locomotives. Namibia has now procured more locomotives from CSR.

“We have never had any problems with the electric locomotives,” he said.

Transnet Freight Rail chief executive Siyabonga Gama said linking CSR Zhuzhou Electric Locomotive, the subsidiary chosen by Transnet, to the Namibian locomotive contract would be perpetuating a lie as this was not the subsidiary responsible for the locomotives delivered in that country.

He said while Transnet was aware of media reports about CSR in Namibia, which had to do with diesel locomotives, the distinction must be made that CSR was providing electric locomotives for Transnet and not the diesel type.

“We are very happy with the first 10 locomotives that we have received from CSR. In fact they are of an above-average standard. Our engineers are pleasantly surprised. We don’t foresee that we are going to get any problems from the locomotives,” Gama said.

CSR delivered the first batch of the 95 class E20 locomotives after only eight months, well ahead of schedule, and Transnet will put some of these CSR locomotives into operation next month.

Transnet said the first batch of locomotives would be delivered in about 15 months. Although Transnet’s fleet procurement programme is a five-year project, the utility said the delivery of all the locomotives would be compressed into just three and a half years.

All except the first 70 would be manufactured and assembled in South Africa at Transnet Engineering’s plants in Durban and Koedoespoort, Pretoria. Transnet Engineering will invest R300 million to upgrade the two plants.

The first 10 of CSR’s electric locomotives delivered to Transnet were manufactured at the Koedoespoort plant.

For the new tender, local content thresholds were 55 percent for the diesel locomotives and 60 percent for the electric ones. Transnet group chief executive Brian Molefe said all chosen companies had met this requirement and in certain instances exceeded it. - Business Report